In the meantime, Draghi asked for patience while the full impact of current policies unfolded.
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FRANKFURT, Germany―The European Central Bank on Thursday raised its 2016 growth forecast slightly but lowered its projections for 2017 and 2018, with bank chief Mario Draghi saying “uncertainties” caused by the Brexit vote would weigh on trade. But so far there has been little hard data to show that’s happening.
But since Britain has yet to trigger the process to extricate itself from the bloc, analysts warn that it could take time for the economic fallout to make itself felt.
MSCI’s broadest index of Asia-Pacific shares outside Japan.MIAPJ0000PUS dropped 1.1 percent, its biggest fall in over a month, after touching a 13-month high on Thursday.
The ECB kept its refinancing rate at 0.00% while maintaining its marginal lending rate at 0.25%.
It also said that its 80 billion euro per month asset purchase programme is meant to run until the end of March 2017, or beyond if necessary, and until the bank sees a sustained adjustment in the path of inflation consistent with its inflation aim.
Instead, the central bank left deposit rates unchanged at -0.4% and confirmed that its monthly €80 billion asset purchase programme will continue until “March 2017 or beyond, if necessary”.
The ECB is facing stubbornly low annual inflation of only 0.2 percent despite pumping 1 trillion euros ($1.1 trillion) in newly printed money into the banking system through bond purchases since March 2015. U.S. Treasury yields also rose, with benchmark 10-year Treasury notes US10YT=RR down 20/32 in price to yield 1.6076 percent, from 1.539 percent late on Wednesday.
“For the time being the changes are not so substantial to warrant a decision to act”.
“Transmission of monetary policy has never worked better than it does today”, he added. “In truth, no one should have been surprised by the ECB’s refusal to extend the date of the QE programme as the Eurozone economy did not really deteriorate since the last meeting on 21st July”. The greenback lost against the Australian dollar after the RBA’s decision, which might have supported the gold market a bit.
The euro bought $1.1265 and 115.28 yen, up from $1.1246 and 114.20 yen on Thursday.
In his effort to underline governments’ responsibilities, Draghi read from this week’s joint statement issued by the Group of 20 most advanced nations in which they said they were ready to use “all policy tools – monetary, fiscal and structural” to improve growth. Repeating its usual forward guidance, the European Central Bank added that rates would stay at their current or lower levels for an extended period, a stance meant to reassure investors that any reversal in rates was many years away. “So it’s just we haven’t discussed it”, he said Draghi.
“These lower interest rates are really damaging the banks”, Jonathan Roy, advisory investment manager at Charles Hanover Investments, said.
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So far, the European Central Bank has slashed its benchmark interest rate to zero, with the aim of lowering borrowing costs for companies and consumers.
